The Munhwa Ilbo reports that global markets are moving to “restrain Korea.” In particular, with Korea concluding several free trade agreements (FTAs), countries are strengthening measures against goods and services in which Korea is strong, like information technologies, home electronics and air cargo. Accordingly, Korean companies are facing a tough time both abroad and at home, where firms face worker strikes, anti-corporate sentiment and all sorts of government regulations.
The paper noted how today’s announcement by the U.S. Justice Department that four Hynix executives would do time was the first time Koreans have been convicted and sentenced in connection with unfair dealings like price-fixing. The Munhwa Ilbo said that by sentencing the executives to jail time, the Justice Department reaffirmed its intention to crack down on unfair transactions.
On the same day as the U.S. ruling, the European Union’s executive commission decided to impose anti-dumping duties for six months on three Korean side-by-side refrigerator makers; 4.4 percent for Samsung Electronics, 9.1 percent for Daewoo Electronics and 14.3 percent for LG Electronics. The commission noted that sales of Korean side-by-side refrigerators skyrocketed 157 percent in the EU market from January 2002 to March 2005, with the market share enjoyed by Korean firms increasing from 66.6 percent to 79.8 percent.
And in case you thought that wasn’t rough enough, recall that on Jan. 24, the Japanese government slapped Hynix with a 27.2-percent punitive tariff on DRAM chips after two Japanese firms bitched that Hynix was being subsidized by the Korean government.
According to the Ministry of Commerce, Industry and Energy, there were 121 cases of penalties being imposed on Korean goods last year in some 20 nations as of the end of last year. By year, there were only 97 as of 1996, but the number climbed to 109 in 2000, 120 in 2001, 128 in 2002, 130 in 2003 and 138 in 2004.
A ministry official said, “Because our exports are growing as our products’ price and quality competitiveness strengthens, they are coming under a lot of foreign restraint.” He noted that companies would have to pay more attention to this in the future.
An official with Samsung Electronics explained that the EU’s decision to impose duties followed complaints by the Italian subsidiary of U.S. home electronics giant Whirlpool. He said foreign firms were moving to restrain Korean goods because they [foreign firms] could no longer bear it as Korean goods win for themselves increasing shares of global markets. He noted that the building of factories in foreign countries, such as LG’s decision to build a plant in Poland, was a measure designed to avoid foreign protectionist measures. He also said that citizen unity was needed in order to protect the gains made by Korea’s economic growth.
An official from the Federation of Korean Industries said, “With foreign companies and governments, which fear our corporations, putting up serious restraints [against Korean companies], our corporations are also being tripped up internally due to labor-management problems and all sorts of government regulations… In order to make our way through international competition, we need active understanding and support from the people and government.”
NOTE: The Segye Ilbo ran a similar piece on rising trade barriers against Korean goods.
35 Comments
Well, pace the FKI spokesman, the chaebol will get no love from the average Korean if this editorial is anything to go by:
“Asked about the most important engine of economic development, 46 percent of Chinese students named businesses. Their Korean counterparts cited the government (32.7 percent). Our children have a completely topsy-turvy understanding of the role of the government and business in a market economy.”
http://english.chosun.com/w21d.....10012.html
The implication that there’s a conspiracy on to “restrain Korea” is laughable when the examples include admitted price-fixing and tariffs in an anti-dumping case that even a Korean gov’t official admitted had some justification.
Moreover, I believe that in the Hynix case, the U.S. Justice Department brought the hammer down on a Japanese and German firm as well. And the Segye Ilbo graph was pretty shocking in that Korea was the No. 2 target of global anti-dumping measures, but it was still being doubled by China, which was facing 434 anti-dumping suits worldwide. Somwhere, a Chinese trade official is reading these reports and thinking to himself, “Welcome to my world.”
Good point–China’s getting bashed (deservedly or not) unlike any other country, and it’ll probably get worse.
Also, Samsung, Daewoo, and LG are multinationals now with large foreign shareholdings–that takes some steam out of the “targeting Korea” argument.
The anti-dumping policies of the US will be a major sticking point in FTA talks.
In the Hynix case, the defendants also included an American company, Micron. Perhaps because it was more familiar with, or better disposed to listen to its legal counsel, about the consequences of stonewalling, it decided to get on the train before it left the station, as they say, and agreed to cooperate with the prosecution. For doing so, which no doubt included dropping a dime on its foreign co-conspirators, it and its responsible executives got off with a bitch-slapping and immunity from criminal prosecution.
If you have any idea how hard you have to work as an individual to get slammed with criminal penalties in an anti-trust case, one can only imagine both how bad the conduct of Hynix and its executives was in this case and what that says about the their disposition to play by the rules. Given the involvement of that other Korean corporate paragon Samsung, and the characterization by the Korean press of this as foreigners ganging up on Korea, one justifiably could draw an inference about the sincerity of Koreans’ commitment to play by the rules.
This is also just the latest in a long line of US anti-trust cases involving Korean companies. While it’s the first in which individuals, at least Koreans, have faced criminal prosecution and punishment, previous cases have involved very serious criminal allegations against the companies involved and huge (hundreds of millions) fines. One such case within the past four or five years involved CJ, which was caught rigging prices with other Korean and Japanese companies for chemicals used in agricultural bulk feeds.
In this case, Hynix itself also got slapped with a 185 million criminal penalty, and Samsung settled the charges against it for 300 million. The CJ case, if memory serves, was resolved for in excess of 100 million.
These were criminal sanctions, so the only unique thing about the current case is that individual executives also are getting slammed.
The fact of Hynix’s monetary penalties also makes nonsense out of Hynix’s official PR blather about this being a private matter concerning the executives involved.
Sounds an awful lot like the NORK’s dishonest whingeing about having been the victim of supernote counterfeiting perpetrated by private actors off on a detour and frolic. Bollocks!
I find it hilarious that convictions for price fixing = ganging up on Korea. As Robert mentioned, it wasn’t just Hynix and Samsung. The Antitrust Division at the Department of Justice was also investigating Infineon and Elpida Memory in Japan. Indeed, Infineon executives also got the same treatment (http://www.usdoj.gov/opa/pr/2004/December/04_at_773.htm).
And it’s not like there’s not precedent for involvement by Korean companies in price fixing - back in the 1990s, the Antitrust Division went after Archer Daniels Midland, Kyowa Hakko, Ajinomoto, Sewon, and Cheil Jedang (the last two being Korean companies) for a conspiracy to fix the price of lysince, an amino acid used as a feed additive (see http://www.ap-foodtechnology.c.....sification; http://are.berkeley.edu/course...../six13.pdf). 3 of the ADM executives served jail time; one Ajinomoto executive, Kazutoshi Yamada, remains a fugitive (as far as I know). In any event, this still isn’t a stick-it-to-Korea issue.
“Japs”? What’s the matter, is “Nips” on vacation this week?
Tony–In fairness to the Korean papers linked above, it was a pretty rough day for Korean businesses, with the Hynix ruling coming out the same day as the EU tarif decision. So it might have certainly seemed like a “group tackle” (that was the term used in the Munhwa Ilbo piece) at the time.
“Yanks, Euros, Japs grouping up on Korean firms?”
In order to be consistent with the previous word usage, shouldnt the title be ‘Yanks, Euros, Japs grouping up on Gookfirms?”? Inquiring minds want to know.
Must be a reflection of my virulent anti-Japanese racism. I am a “house-nigger,” after all.
Self-awareness is the first step to recovery.
What’s this, affirmative action for Korean journalists? Their precious feelings are hurt; their tribal feathers are ruffled; so their failure to put the story in perspective and play the Korean victimization card gets a pass?
Where are Tom Wolfe (Radical Chic and Mau-Mauing the Flak-catchers) and the spirit of HL Mencken when they’re needed?
Is that an oblique way of saying that you homestayed on a southern plantation for your African studies? “house-nigger” was never anything I said.
Spewer–I apologize for seeming to give the two papers a pass. I simply meant to point out that it was a rough day with two unfavorable decisions being handed down, which is why the two papers might have felt Korea was being gang-banged. I mean, yeah, maybe those anti-dumping measures were handed down because of the increasing competitiveness of Korean goods in world markets. But then again, maybe those anti-dumping measures were handed down because, well, Korea is dumping goods in overseas markets. Frankly, I don’t know enough about the subject to issue an informed opinion on the matter, although judging from the reports and the comments cited in those reports, one has to be quite skeptical.
At any rate, I have a feeling this is going to become something of a meme, so get used to it now.
Skakuhachi-I didn’t say it was you who called me a “house nigger.”
ORblog
if it is an amino acid feed additive, it must be lysine, not lysince
Robert: I’ve been getting used to it for 12 years. I’m never going to accept it, though, or stop calling ‘em on it.
I read an recent WSJ article about how law firms that specialize in anti-dumping cases involving foreign, especially Chinese enterprises, are getting rich off of all this. Some of the lawyers are from the Justice Dept or the Commerce Dept, where they used to be at the opposite side of the courtroom.
Under the assumption that the charges being brought against South Korean companies abroad as of late are correct, I think there are two ways to look at this.
1) People are ganging up on S. Korean firms for…. who knows what reason (Perhaps these governments want to ?illegally? protect their domestic markets.)
2) South Korea’s economy has developed enough to the point that its corporations need to play by the rules.
I think more along the lines of option #2. As South Korea’s economy has grown over the years, the number of multi-national companies originating from South Korea has grown as well. If the percentage of companies that commit crime abroad is the same across all countries of origin, then the number of companies from any country that get caught cheating will grow as well. I don’t think this is a case of the world ganging up on Korea, but just a show of how much Korea has grown to even have this many multinational companies to be prosecuted.
If these charges are indeed true, then I say to leaders of Korean and all companies, play by the rules and you’ll be fine. If they turn out to be false, shame on these governments, but at the same time it still shows how much South Korea has grown if this large a number of its companies are considered a threat to such a number of countries around the world.
Bluejives, was it this story? I just skimmed it without reading it all yet:
http://www.post-gazette.com/pg/06048/657110.stm
Lawyers, lawyers, lawyers….
Yes, that’s exactly the one. Benedict Arnold lawyers, they are.
There was another very interesting article in the WSJ about Chinese companies and the vitamin C industry, which I am now kicking myself for not having saved it.
Six years ago, the Feds busted a group of European and Japanese vitamin makers for $1 billion in fines for forming a cartel to fix prices. Some of the executives went to jail. The prosecution created a kind of a void in the industry and some fledging Chinese companies got into the business of making vitamin C. At the same time, a Chinese research bureau came up with a very unique process for making vitamin C which gave them an advantage of production costs half of that of other producers. They did very well, they now have 60% of the world market for vitamin C. Initially, the Chinese producers sold at low prices but not so low that it registered on the anti-dumping radar. The Chinese gov, fearful of possible dumping charges, memo’ed the producers to not sell at artificially low prices. The producers interpreted this that they should raise prices so that’s what they did. Vitamin C went from $2.50 / kg to a peak of $15 / kg. So now the US Justice Dept is after them, not for too low prices but too high ones and the charge is anti-trust.
Moral of the story: you’re damned if you do and damned if you dont.
One look at the list of tariffs in Korea is enough to convince that the ganging goes both ways. Funny how a country who makes its living off exporting, and bitches every time a tariff is raised somewhere, is so reluctant to lower its own tariffs…
as dda said, anti dumping is just another form of tariffs.
At any rate, I have a feeling this is going to become something of a meme, so get used to it now.
Robert: I’ve been getting used to it for 12 years. I’m never going to accept it, though, or stop calling ‘em on it.
Until the MBC takedown of Dr Hwang, I never imagined that he Korean mass media could ever do anything but carry water for Korean Inc. (and in fact most outlets performed to pattern and attacked MBC). I’m afraid that heroic case will remain an exception.
Korean companies and Korean government should learn to spend money in influencing politicians. Instead of giving bribes a small group of politicians as needed, Korea Inc. should set up a pool of money (in the tune of billions) to consistantly and continously give to both political parties for a long duration.
The Japanese and the Chinese are doing a better job in “buying” American politicians than “Naembi-style” Koreans.
If Korea buys sufficient number of “right” politicians (those who exert influence over the Justice department), it doesn’t have to pay this tariff.
Korea has much to learn about how things really work in Western society.
Koreans tried that, Baduk. Remember “Koreagate”?
baduk,
That’s not the way it works. You hire lobbyists, not bribe politicians. One is legal, the other is not. It’s effectively the same thing, but the Americans seem to think there’s a difference.
Maybe Korea should legalize lobbying and election campaign funds, just like the US. Then maybe a big chunk of corruption would go away in one big swoop.
I don’t think the Korean nativist faction here really wants to go out on the limb of comparing US-ROK corruption, but if you do get tempted, stop and ask yourself where Ken Lay is sitting now and then check what Chey Tae-won is doing.
Slim, is that the best comparison? Although Chey Tae-won managed the stunning feat of not getting the boot from SK Global despite doing 7 months, the fact is that he DID do time. Do you honestly think Ken Lay will too? (That is not rhetorical; I honestly want to know).
By the way, did you hear the rumour about how Chey Tae-won fathered Ko So-young’s love child? Apparently that’s why she’s been off the celebrity radar for so long.
Actually, if Slim really knew what he was talking about, he should have asked where Bernie Ebbers (of Worldcom scandal fame) is sitting now, since what Ebbers did is more directly comparable to that of Chey Tae-won. But the Enron trial is still in progress and we dont know what the verdict is yet. Mostly likely, Mr Lay will do some time in a country club prison and afterwards be where Martha Stewart is now.
I had (it’s a little old now). Basically, she’s paid large sums to hang out in the States. And - though I’ll not be the first to write it here - there’s a bit more to that story…
Regarding CTW’s return: Sovereign had a hard-on to have him ousted, because he stood in the way of their efforts to break the company up. Chey returned to helm largely because local investors and the Roh Moo-hyun government didn’t want to see that happen, and he’s weathered the storm because the rise in global oil prices has increased SK’s profitability.
gbnhj: Regarding CTW’s return: Sovereign had a hard-on to have him ousted, because he stood in the way of their efforts to break the company up. Chey returned to helm largely because local investors and the Roh Moo-hyun government didn’t want to see that happen, and he’s weathered the storm because the rise in global oil prices has increased SK’s profitability.
Whatever Sovereign’s intentions, don’t you think that being convicted of fraud is pretty good grounds for dismissal as boss of a firm?
Oh, and please tell us what you know about Ko So-young.
Yes, I do think that it’s good grounds for dismissal - not just in this case, but generally. However, in this case there is little left to ponder, as the events have already transpired. At this point, Sovereign maintains its desire to see Chey removed, but no other large investors do, for the reasons already stated.
And, about the other - no (sorry
)
you big tease, gbnhj
Bluejives, after that unfortunate scumbag episode and now this, I fear you are losing whatever grip you had. Maybe those savagings by iheartblueballs have take a bigger toll than we’d thought.
Bernie Ebbers is appealing a, what, 25-year sentence. Chey got a light suspended sentence, runs his company and is a captain of Korean industry. (Lay is likely to do time, legal analysts say.)
I rest my case.